Government misses t-bill target again amid falling yields: What it means for Ghana’s economy

By: Emmanuel Boateng

The Government of Ghana has once again fallen short of its Treasury Bill (T-Bill) auction target, raising important questions about market sentiment, investor confidence, and the government’s financing strategy. In the latest auction held on June 5, 2025 (Tender 1958), the government aimed to raise GH¢6.67 billion but managed to secure only GH¢4.38 billion. This follows a similar shortfall in the previous auction, where just GH¢3.54 billion was raised, well below the same target.

This persistent underperformance comes at a time when yields on T-Bills are gradually declining across all tenors. The 91-day bill saw a marginal dip in its weighted average interest rate from 14.79 percent to 14.79 percent, while the 182-day and 364-day bills also experienced declines to 15.46 percent and 15.80 percent, respectively. Although subtle, these downward adjustments reflect a broader shift in market expectations and monetary conditions. The auction results indicate that while the government is benefiting from a declining interest rate environment, demand is not robust enough to meet its borrowing needs.

In terms of participation, the 91-day bill saw the highest investor interest, attracting bids worth GH¢3.51 billion. Of this amount, GH¢2.65 billion was accepted by the government, a little over 75 percent of the total. The 182-day bill received bids totaling GH¢1.81 billion, with GH¢1.67 billion accepted, showing stronger conversion relative to the 91-day tenor. The 364-day bill, however, saw significantly lower interest with only GH¢157.18 million tendered, out of which a modest GH¢48.44 million was accepted. This suggests investor preference is still skewed toward the shorter end of the yield curve, possibly reflecting lingering caution about long-term fiscal risks.

The trend also shows a more selective acceptance policy by the government, particularly for the 364-day bill. While previous auctions saw full subscriptions accepted, this auction had the government accepting just 30.8 percent of the bids tendered for the one-year tenor. It appears the government is prioritizing cost control over volume, accepting lower volumes at more favorable rates rather than absorbing costlier bids just to meet target amounts. Whether this is sustainable in the face of persistent funding shortfalls remains to be seen.

One factor influencing investor behavior is the recent improvement in macroeconomic indicators. Ghana’s inflation rate dropped sharply from 21.2 percent in April to 18.4 percent in May 2025, the steepest monthly decline seen in over a year. This has reinforced market speculation that the Bank of Ghana could be approaching a turning point on interest rates. The central bank’s Monetary Policy Rate (MPR), currently held at a restrictive 28 percent, remains significantly above T-Bill yields, creating a wide interest rate differential. For investors, this raises questions about real returns and future rate direction.

Market analysts are divided in their interpretation of the declining yields and undersubscriptions. On the one hand, the easing rates suggest that inflation expectations are improving and that investors anticipate a more stable macroeconomic outlook. On the other hand, the inability to fully raise targeted amounts may reflect waning investor appetite, caution around fiscal sustainability, or simply tighter liquidity conditions in the financial system. “The government may be aiming to ride the momentum of falling inflation, but they risk running into funding gaps if investor demand doesn’t keep up,” said a local bond trader who requested anonymity.

For the government, these results represent a delicate balancing act. While falling yields may ease interest costs in the short term, the inability to meet borrowing targets complicates fiscal planning and could potentially delay the execution of public expenditure. Given Ghana’s limited access to long-term international capital markets, the T-Bill market remains a vital financing tool. Failure to attract enough domestic capital at acceptable rates could force the government to consider alternative, and possibly more costly, sources of funding.

Investor confidence, while not collapsing, appears to be cautious. The recent auctions suggest that investors are becoming more discerning, weighing the trade-offs between declining returns and overall macroeconomic risks. The challenge for the government now is to sustain this fragile confidence while executing its fiscal program and managing its debt rollover risks.

With inflation falling and T-Bill yields declining, attention will now turn to the Bank of Ghana and its next steps on monetary policy. If disinflation continues into June and July, the case for a rate cut will strengthen, which could further support market sentiment and reduce the government’s cost of borrowing. Until then, the government must navigate a complex financial environment, one where optimism is growing but vulnerability still lingers.